Echo of 1984 Betamax landmark in U.S. high court Aereo TV fight

April 20, 2014|Lawrence Hurley and Liana B. Baker | Reuters

WASHINGTON/NEW YORK (Reuters) - When the U.S. Supreme Court hears a one-hour oral argument in Washington, D.C., on Tuesday, it will not be the first time the court's nine justices will have the final say over the fate of a new TV viewing technology.

Thirty years ago, the big media companies went to the high court to block Sony Corp's Betamax video recorder. This time, their lawyers are lined up against Aereo Inc, a two-year-old service that streams TV channels online.

In a January 1984 decision that spurred an upheaval in the way Americans watched TV and prompted other innovations, the high court ruled on a 5-4 vote that the sale of Betamax machines, which could record shows for later viewing, did not constitute contributory copyright infringement.

Whether or not Aereo, which charges users a fee to watch broadcast TV channels online, benefits from that precedent depends in part on how much the nine justices, all appointed to the court since then, see similarities in the two cases.

The four major broadcasters say Aereo is infringing on their copyrighted content.

Aereo, backed by Barry Diller's IAC/InterActiveCorp who helped found the Fox broadcast network, does not pay the broadcasters for content the way cable companies do. Subscribers can stream live broadcasts of TV channels on mobile devices using miniature antennas that Aereo hosts, each assigned to one subscriber.

The case, due to be decided by the end of June, could have broad implications beyond the immediate fate of Aereo's business.

Should the court rule against Aereo, it could deal a blow to increasingly popular cloud computing services, in which personal files - including TV shows and music - are stored remotely on the Internet on servers from companies such as Google Inc, Microsoft Corp, DropBox Inc and Box Inc.

Aereo's fate was placed in the hands of the high court when Walt Disney Co's ABC network, CBS Broadcasting Inc, Comcast Corp's NBCUniversal and Twenty-First Century Fox Inc appealed a decision by the 2nd U.S. Circuit Court of Appeals in April 2013 that denied their request to shut Aereo down while litigation moved forward.

BETAMAX LEGACY

The electronics industry embraced the 1984 Betamax decision for inspiring innovation that led to such products as Apple Inc's iPod, according to Gary Shapiro, CEO of the Consumer Electronics Association. At the time, he helped marshal support for Sony's legal arguments.

"We called that case the Magna Carta," Shapiro said.

The two sides in the Aereo case differ over the relevance of the Betamax decision. The broadcasters do not cite the 1984 case at all in their main brief while Aereo mentions it 12 times.

The legal question is whether the Aereo service constitutes a "public performance" under the Copyright Act, which would violate the law, or whether subscribers are viewing private performances in the same way they would if they used a digital video recorder (DVR) to record a show.

The broadcasters say that while Betamax was a genuinely revolutionary technology, Aereo is simply a service that was designed to skirt copyright law.

"There's nothing innovative about the technology," said Neal Katyal, a lawyer representing the networks.

Aereo says its service is no different from a person attaching an antenna to a roof, which is the traditional way viewers could obtain broadcast TV signals for free. Diller, its high profile investor, adds that broadcasters have access to the airwaves only because they agreed to provide free programming.

The impact on broadcasters so far has been limited. Aereo, which is available in 11 U.S. cities, has never disclosed its user base. It is estimated to be miniscule compared to the 100 million U.S. customers who pay for television. But should Aereo prosper, it could threaten the $3 billion in so-called "retransmission fees" that research firm SNL Kagan estimates broadcasters get from cable and satellite systems.

Should Aereo win, cable operators might consider adopting its model. Some broadcasters such CBS have even threatened to cut off their free-to-air broadcast signals or create their own low-cost Internet feeds of the channel.

CLOUD COMPUTING

Aereo and some of its allies have stressed the possibility that a ruling against it could also affect cloud computing.

Aereo's CEO Chet Kanojia said that buying a Taylor Swift song on iTunes and then listening to it later on a cloud storage service such as Google Drive, which is perfectly legal, is "technically not different than recording a show in your home or at a remote location and putting it in a cloud based DVR or storage locker and streaming it to yourself."

While consumers may not be paying for a TV recording, they have the legal right to record programs and watch them later thanks to the Betamax ruling, he added.

Cablevision Systems Corp, which prevailed over broadcasters in a key 2008 ruling over its cloud storage digital video recorder that set a precedent for Aereo, has said in a court filing that the broadcasters' approach is too broad and could have a "disastrous effect" on cloud computing.

The broadcasters have brushed off the cloud computing argument, saying in a court filing that there is an "obvious difference between providing storage for content that the end-user independently possesses and making the content itself available to anyone who pays a fee."

(Reporting by Lawrence Hurley in Washington and Liana B. Baker in New York; Editing by Howard Goller)